Overall, the weak consumer PC sales are a reflection of the poor economy, according to Wang.
Advanced Micro Devices
(AMD - Get Report)
( NVDA )
(MRVL - Get Report)
are major Intel rivals that could also be affected by the weaker-than-expected consumer PC demand, Sterne Agee's Rakesh said.
And it could be most painful for rivals such as Nvidia and LSI, given their consumer-focused products.
Williams Financial analyst Cody Acree pointed out that "they're less enterprise-based ... so if you're getting a shift mix to corporate markets, especially where your [average selling] prices are typically higher, it's a double hit to those firms that are consumer-levered."
Acree said the impact on Intel from the weaker consumer PC markets will not be as bad as long as corporations are still running with relatively aged technological infrastructure and require upgrades -- which they can currently afford to do. According to Acree, "we're seeing the healthiest corporate balance sheets in many years ... cash-rich companies with little debt."
Intel's expectation for third-quarter gross margin is now 66%, lower than the previous expectation of 67%, but analysts said that 66% is still "hot."
"Sixty-six percent is an amazingly high gross margin for chip company," said Wang. He said the company's strong product mix is helping to keep margins in the ball park. Meanwhile, Roth Capital Partners' Arnab Chanda said 66% is close to an all time high and "very impressive."
Acree calls the 66% figure a "hot number. He would be concerned however, if Intel's gross margin figure had dipped to 56% due to a double-dip recession and other factors. "If things slow down, you end up having the same overhead but not the same revenue, so that changes margins very quickly if you're a manufacturing company with very expensive overhead factories." Intel controls its own manufacturing, Acree pointed out.
Currently, Gleacher's Earl Hege, Rakesh and Chanda are among analysts who don't believe Intel's lowered guidance will have a big impact on the company's bottom line. Chanda said he doesn't see a "catastrophic impact on EPS."
-- Written by Andrea Tse in New York.
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